The App Economy: Free is on the Rise

I went app shopping last night. And by that, I mean I went looking for a free app for my iPad. It’s not that I don’t want to see hard-working web developers make money, but I’m concerned about wasting even .99 on an app that I don’t like. Because out of every ten apps I download, I keep and use only 1.

I was looking for a brainstorming app and about half of them had price tags. One, MindNode, was listed at $9.99. Really? Is it that good? I also found some at $3.99, $5.99 and $1.99. Figuring they all do pretty much the same thing, that’s a wide range of prices. I settled on five free options – two of which I can upgrade for a price if I like them. Now that’s how you sell an app.

This morning I reviewed some data by Flurry and found that, regardless of my own pricey experience, free apps are on the rise.

Way back in 2011, .99 apps were all the rage and free was at its lowest point ever. Since then, free has been creeping upward and now a whopping 90% of all iOS apps are free. 6% sell for .99 and the $5.99 and up point is a line too thin to see. Compare this to the top of the 2010 chart where pricy apps weren’t popular but they were visible.

The numbers get worse when you compare iOS to Android. Those Android folks are even more reluctant to give up a dime.

You could look at all of this and say there’s no money in app sales, but that’s not true. People are spending billions on apps they’re just not spending it the way we first thought. According to Distimo, in-app purchases were responsible for 76% of the app revenue this past Feb. There’s also the advertising factor. Clearly people are willing to tolerate ads in order to get an app for free. If enough people play your game, a developer could rake in much more in ad dollars than he’d make selling the app for $1.99.

Of course, all of that supposes that you companies are willing to pay proper prices for display ads and that you can convince people to download your app – even for free.

Last night, I downloaded 5 brainstorming apps. I deleted two within 30 seconds of opening them. One was too difficult to understand. The other was just ugly. I have three more to test. By tomorrow. . . if I’m lucky. . . I’ll have 1 left that suits my needs. Good thing I didn’t pay for any of them out of the gate.

When you only had a couple of apps to choose from in a category, you could afford to put a price tag on your hard work. These days, there are ten apps that do the exact same thing with different window dressing. Yours might be the best but no one is going to know that if you force them to hand over cash before they try.

Free is here to stay. Time to figure out other ways to make those apps pay.

Sarah Bauer

Great post. I think it’s all about those options for upgrades. Give the customer enough free usage of an app to determine how much better his or her life is with it, and then give a little bit more. Just enough to reveal the even greater possibilities that await the user for the measly upgrade price of $2.99. Upgrades. That’s where we’re headed in the app goldrush.

http://about.me/josephmanna Joseph Manna

Free is on the rise because of all the perpetual revenue generation from ad networks.